Spiegel Pins Hopes on Catalog Revamp

Geralynn Madonna was candid in an interview this week regarding the relaunch of Spiegel's women's apparel and home furnishings catalog -- also known as the Big Book -- along with its Web site.

"This is our turnaround strategy," said Madonna, who was named president/CEO of Spiegel Catalog and Newport News in March 2003, just before Spiegel filed for Chapter 11 bankruptcy protection. "We're reinventing a household name. We've done many things to restructure the company. It's a big part of it, but it's not the whole part."

Conventional wisdom dictates that a "winner" is needed based on several factors, including:

· The Spiegel Group will mark the anniversary of its bankruptcy filing in March.

· The Downers Grove, IL, company saw sales plummet 33 percent in the five weeks ended Dec. 28 as Spiegel's catalog and e-commerce sales plunged 42 percent because of "lower customer demand and a planned reduction in catalog circulation."

· Though a reorganization plan was to be filed in February, company spokeswoman Debbie Koopman said it's "very likely" that Spiegel will ask for an extension. The spring 2004 catalog has the look of two books condensed into one publication. Apparel is featured through page 194, after which the book is flipped to its other cover, allowing the shopper to begin viewing items for the home.

"[In the] Big Book, half is fashion apparel and the other half is home, entertaining and gifts," Madonna said. "That's our trademark -- the way it flips. The flip and logo were not changed. Everything else is totally repositioned."

Both inside covers include a letter from Madonna. Opposite the letter are biographies and photographs of celebrity contributors. Spiegel is counting on star power in the relaunched book, which includes a team of celebrities such as Lauren Hutton, chef David Burke, Elle Decor contributing editor Elaine Griffin and stylist Wayne Scot Lukas.

"Having them in our book is what distinguishes us from other catalogers, and it's also an endorsement for the catalog," Koopman said.

Madonna said the celebrities were handpicked.

"Lauren Hutton is ageless [at] 60 years old," Madonna said. "Sixty is the new 30, and that's why we picked her. And there isn't a better stylist than Wayne Scot Lucas. The modern woman is time-starved. [This catalog] is a how-to guide for both style and shopping [with] advice and tips, giving her one-stop shopping."

Madonna added that research has revealed that 80 percent of women in the United States, "especially our customer," decorate at least one room each year.

"Our median age [that we're targeting] is still 46," said Madonna, who added that the median age of a catalog shopper is in the "high 40s."

The new catalog's circulation exceeds 3 million, up from the 2 million dropped for the fall '03 version. The book is 400 pages, down from 500-plus for spring '03.

Madonna said "a large percentage" of books include a cover offer enticing recipients to "BUY TODAY, we'll bill you in May."

"That's a marketing promotion, [and] it depends on which customer segment" someone is in, regarding if they receive the offer or not," she said. "It's totally necessary in the competitive environment."

Much of Spiegel's $1.5 billion in debt stems from problems related to its efforts to market credit cards to the sub-prime market. Madonna would not discuss whether sub-prime customers received the "buy now, pay later" option.

"We've actually taken out all the credit-dependent products," she said. "We had a very large section on electronics and edited it. We also edited the Running the Home section. [It] is now Smart Solutions, which formerly had a lot of vacuum cleaners, sewing machines and fireplaces. [It now provides] more of a relevant lifestyle reason to buy vacuum cleaners. We are mailing 100 percent to the 12-month file with reactivation [of customers] we've lost over the last 13 months-plus, and we're also doing [significant] prospecting."

Koopman and Madonna provided no specifics when asked about metrics such as response rate and average order amount needed to make the effort a success.

A $5 million investment will support the initiative. Spiegel is supporting the catalog relaunch with print, television, Internet and direct mail advertising. For the first time in more than 10 years, the company is advertising on TV, with 60-second cable spots that began airing the week of Jan. 12. The print buy includes national magazines and regional newspapers, starting in February. Advertorials with mini-catalogs will run in women's magazines such as InStyle and O, the Oprah Magazine. This week the book began mailing and its e-commerce site relaunched at www.spiegel.com.

Specialty catalogs are to go out in two weeks, including "about seven or eight for the spring season," Madonna said. All will be based on sections in the semiannual Big Book.

Scott Smallman, senior vice president and analyst at Piper Jaffray, Seattle, is not optimistic with Spiegel's prospects of a turnaround.

"I think there's always a shot at making a comeback with a brand that had as much equity as it had," he said. "But in the catalog world there has been so much of a move toward online, and I don't know if relaunching a big, fat catalog can make a difference. It's not something you would want to bet a lot of money on."

Spiegel Inc. was trading at 10 cents early today.

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